Investors in Brady Corporation (NYSE:BRC) had a good week, as its shares rose 4.5% to close at US$57.24 following the release of its first-quarter results. Revenues disappointed slightly, as sales of US$287m were 2.3% below what analysts had predicted. Profits were a relative bright spot, with per-share earnings of US$0.70 coming in 12% above what analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Following last week's earnings report, Brady's four analysts are forecasting 2020 revenues to be US$1.17b, approximately in line with the last 12 months. Earnings per share are expected to be US$2.62, roughly flat on the last 12 months. Before this earnings report, analysts had been forecasting revenues of US$1.17b and earnings per share (EPS) of US$2.57 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$51.67. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Brady analyst has a price target of US$55.00 per share, while the most pessimistic values it at US$49.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
In addition, we can look to Brady's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. From these estimates it looks as though analysts expect the years of declining sales to come to an end, given the flat revenue forecast for next year. That would be a definite improvement, given that the past five years have seen sales shrink five years annually. Compare this against analyst estimates for the wider market, which suggest that (in aggregate) market revenues are expected to grow 5.7% next year. So it's pretty clear that, although revenues are improving, Brady is still expected to grow slower than the market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Brady analysts - going out to 2021, and you can see them free on our platform here.
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